| By Alastair Marsh When Morgan Stanley moved the goalposts back on its climate targets in October, members of the industry's biggest climate alliance were caught off guard. The steering group of the Net-Zero Banking Alliance (NZBA) debated if the Wall Street firm — at that time a member of the group — would be allowed to deviate from the founding principle that signatories align portfolios with the goal of limiting global warming to 1.5C, according to a person familiar with the matter. The group also discussed what the consequences for such a move should be. Citing the slow pace of global decarbonization, Morgan Stanley explained that it would instead be targeting a range of temperature outcomes, with a lower bound of 1.7C. To be sure, it isn't the only bank to have a target range for portfolio decarbonization: rival Goldman Sachs Group Inc. follows a similar approach. But at the time, the changes could be seen as a rare public admission from a major financial firm that industry climate goals were unattainable.
Fast forward five months. With a global warming skeptic now in the Oval Office turbocharging the anti-climate right, the alliance itself is considering steps that include possibly abandoning the 1.5C goal, Bloomberg reported. A spokesperson for NZBA said the group's focus hasn't changed and that it's still supporting members' efforts to finance the transition to "a net-zero emissions economy." To recap: The 2015 Paris climate agreement set 1.5C as a so-called stretch goal, with the overarching ambition being (by 2100) a global average temperature less than 2C above pre-industrial levels. While most corporate net-zero targets are pegged to 1.5C, scientists have warned it's "virtually certain" the world has already breached that level. Whether it's still tenable to align with the 1.5C goal is one idea in a wider rethinking of the finance industry's climate playbook — one brought on by a potent combination of politics and science. In the past two weeks alone, Wells Fargo & Co. said it's no longer planning to reach net-zero emissions, and HSBC Holdings Plc announced it's walking back some of its prior emissions goals. That followed the recent NZBA departures of the largest North American banks, including Wells Fargo and JPMorgan Chase & Co.— as well as Morgan Stanley, which declined to comment for this story. For Owen Hewlett, chief technical officer at the Gold Standard Foundation, the conversation on 1.5C targets often misses the point: Just because the world is on course to breach the 1.5C threshold, that doesn't undermine the value of individual efforts to target lower temperature outcomes. "We need to separate the global feasibility of 1.5C from its role in corporate target-setting, otherwise corporate targets become a moving target, shrinking as temperature projections rise," Hewlett said. "If we tie targets to ever-worsening real-world scenarios, we risk reducing ambition." Hewlett said 1.5C must remain "the level of credible responsibility" for corporations even if it isn't actually achievable for the planet. While efforts to reach net-zero emissions by the middle of the century are "ecologically and economically essential," the standard also has been "terribly misapplied" in the financial and corporate sectors, said Lisa Sachs, who heads Columbia University's Center on Sustainable Investment. Such goals are often inconsistent with what's needed to decarbonize the real economy, she said. "Achieving global net-zero emissions requires systemically reducing emissions across energy, transport, industry and land use, while deploying credible removal mechanisms for any residual emissions," Sachs said. "Those sectoral transformations require planning, policies and coordinated actions, so individual voluntary actions from financial institutions, disconnected from sector-wide transformations, won't get us there." Moreover, with the planet increasingly misaligned with the goal of limiting warming to 1.5C, financial firms that persist in trying to stay under that number may be putting themselves at risk. So said Tom Gosling, professor in practice in the financial markets group at the London School of Economics. "If an investor clings onto the notion that the world is going to hit 1.5C or that they're going to drag the world onto that trajectory, and if they invest in line with that, then there's a real risk that they end up not serving their clients interests in a scenario where the world hits 2C or higher," he said. "They could end up with a very misaligned investment strategy that causes real harm to their clients' interests." Sustainable finance in brief | Clean is dead. Less than a year after launching a hedge fund dedicated to the green energy transition, its founder says there's currently no financial gain to be had from investing in renewable power. "The whole sector — solar, wind, hydrogen, fuel cells — anything clean is dead for now," said Nishant Gupta, founder and chief investment officer at London-based Kanou Capital LLP. Against a barrage of far-right political headwinds from Republicans and Big Oil, a war-fueled energy crisis and stubbornly high interest rates, large parts of the clean-energy industry are stalling. In the past year, the S&P Global Clean Energy Index has lost 20%, a period during which the S&P 500 Index gained 16%. And with the Trump administration shredding climate policies in the world's largest economy, many green investors are taking a timeout.  US President Donald Trump Photographer: Kent Nishimura/Bloomberg | 
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